2012 Brooklyn residential development sales surge

Reacting to the rising rental market in Brooklyn, investors purchased more than 1.5 million square feet of residential development space in the borough during the first six months of 2012, almost four times the amount purchased during the same period in 2011, The Real Deal found in an analysis of Massey Knakal Realty Services data.

Investors spent $171 million to buy those 1.5 million square feet this year, while developers paid $55 million during the first six months of 2011 to buy land with just over 400,000 square feet of development rights, the analysis reveals.

Developers are trying to capitalize on the tight rental market in the borough, where brokerage firm MNS shows rental rates for studios and two-bedroom apartments rose by double digits in May, compared to the same period a year ago.

The Manhattan builder the Chetrit Group made the largest Brooklyn development acquisition so far this year, paying $25 million for a warehouse at 77 Commercial Street in Greenpoint that is zoned for residential. While the developer could build a 271,499 square foot building under its current zoning, they could more than double the site to 618,339 square feet if they add affordable housing and purchase additional air rights.

The total amount of buildable square feet purchased in Brooklyn rose in part because lenders are jumping back into the construction finance market, Michael Amirkhanian, director of sales at Massey Knakal, said.

“There had been a lot of deals getting kicked around but now they are actually getting financing,” he said. Lenders are generally underwriting projects as rentals, he added.

The 1.5 million square feet purchased this year would turn into about 1,500 apartments if each has an average size of 1,000 square feet.